Asset Allocation Contest for Investment Section Members Only
We are pleased to announce the 2019 Investment Section Asset Allocation Contests (collectively "Contests;" individually "Contest"). For those of you who have participated before, the contest will be similar to the 2018 contest. Entries must be submitted by March 31. The Contest will run from April 1 - September 30.
We will continue to have three distinct Contests based on realistic scenarios. Participants are encouraged to enter a portfolio in each of the three Contests.
The three Contests are:
- Maximize Risk-Adjusted Alpha
- Maximize Accumulation
- Manage Drawdown Risk
- Contest portfolios start with a balance of $100,000 USD.
- Each Contest can have its own specific asset allocation. Each portfolio must include at least four ETF funds with individual allocations of 10% of the portfolio or greater. Additional ETF funds may have allocations lower than 10%. Allocations must be whole numbers only, and there is no ability to incorporate negative numbers (no short positions).
- There are two rebalancing options (manual rebalancing was removed due to low utilization):
- No rebalancing.
- Automatic rebalancing. Automatic rebalancing will reallocate the portfolio NAV to the initial allocation at the end of the last business day of each month (for each contest independently), received by 11:59 p.m. CDT. Automatic rebalancing must be selected with the initial entry; it cannot be added or cancelled after the Contests have opened.
- NAV and standard deviation will be calculated on a daily basis.
- The ETF lineup includes the 19 funds listed.
- Asset performance will be recorded as seen on Yahoo! Finance using the adjusted closing price. Volatility calculations and other computations will be performed by Investment Section Council members using the adjusted closing price. Volatility calculations and other computations will be performed by Investment Section Council members using market-accepted formulas.
There will be at least one winner for each contest. Multiple winners are allowed in the event of a tie. Each contest has a cash prize of $400. (For more detail, refer to section Prizes in the "2019 Asset Allocation Contest - Official Rules")
Maximize Risk-Adjusted Alpha
For this contest, the goal is to produce the highest risk-adjusted alpha over the benchmark fund (60 percent ACWI, 40 percent AGG, rebalanced monthly). During the contest period, with alpha is defined as follows:
- The realized return of your allocation, less
- The realized return of the benchmark fund (60 percent ACWI, 40 percent AGG), scaled to achieve the same realized volatility of your allocation over the contest period.
For example, if your allocation returned 7 percent with 12 percent annualized volatility and the benchmark fund returned 5 percent with 10 percent annualized volatility over the period, your alpha would be 1 percent = (7 percent - (5 percent)*(1.2)). If your allocation returned 3 percent with 5 percent annualized volatility, your alpha would be 0.5 percent = (3 percent - (5 percent)*(0.5)).
The goal is to accumulate the maximum amount over the Contest period. Note the portfolio constraints above. We have removed the "manager review" and the provision for adding $10,000 per month.
Manage Drawdown Risk
The goal is to maximize the lifetime of your portfolio, where withdrawals of $900 (pulled from funds pro-rata) will occur at the end of each trading day until the account value is exhausted. It is possible that no portfolio will survive to the end of the contest. In that case, the last portfolio with positive value wins. If the last two (or more) portfolios run out on the same day, the highest value prior to the final withdrawal wins. If multiple portfolios remain positive at the end of the contest, the highest value wins.
Available ETF Funds
|ITOT||iShares S&P Total U.S. Stock Market|
|IVV||iShares Core S&P 500|
|IJH||iShares Core S&P Mid-Cap|
|IJR||iShares S&P Small-Cap|
|ACWI||iShares MSCI All Country World Index|
|IXUS||iShares Core MSCI Total International Stock|
|IEFA||iShares Core MSCI EAFE|
|IEMG||iShares Core MSCI Emerging Markets|
|AGG||iShares Core U.S. Aggregate Bond|
|LQD||iShares iBoxx $ Investment Grade Corp Bond|
|HYG||iShares iBoxx $ High Yield Corporate Bond|
|TIP||iShares TIPS Bond|
|TLT||iShares 20+ Year Treasury Bond|
|SHY||iShares 1-3 Year Treasury Bond|
|IAGG||iShares Core International Aggregate Bond|
|CEMB||iShares Emerging Markets Corporate Bond|
|COMT||iShares Commodities Select Strategy|
|EMIF||iShares Global Infrastructure|
|USRT||iShares Core U.S. REIT|